Dubai is now known as the globalized financial city of the United Arab Emirates (UAE), a centre for commerce, tourism, and finance, thanks to an oil and real-estate boom. The city-state, reaching for the stars, is brimming with gleaming infrastructure. It has been associated with massive developments such as man-made islands, the world’s biggest natural flower park, the world’s tallest Ferris wheel, and the world’s most opulent hotels.
Some of Dubai’s long-standing companies are beating global recessionary patterns by diversifying their income sources – globally, sector-wise, and product-wise – in this age of hyper-localisation and ultra-globalisation. Dubai’s government and its institutions are pulling off a masterful juggling act: while oil output is being prudently increased, sustained spending in infrastructure and industry is allowing non-oil and gas GDP to expand at a faster pace. As a result, oil and gas’s share of overall GDP continues to decline, in accordance with Vision 2030’s goals.
Why Diversify?
The biggest concern now is that companies should consider diversification. The solution is straightforward: “Don’t put all your eggs in one basket.” Any financial investor would inform those trying to bring their capital to use this way. The law applies to corporations as well, and the current market climate makes it more applicable than it has ever been. This entails distributing the money through a variety of assets so that you aren’t solely dependent on a particular investment for all of your returns.
Key Benefits of Diversification
Three key advantages of diversification include:
- Minimizing the risk of loss – if one investment performs poorly over a certain period, other investments may perform better over that same period, reducing your investment portfolio’s potential losses from concentrating all your capital under one type of investment.
- Not all investors are in the accumulation phase of life; some who are close to retirement have goals oriented towards the preservation of capital, and diversification can help protect your savings.
- Generating returns – sometimes investments don’t always perform as expected; by diversifying, you’re not merely relying upon one source for income.
A diversified portfolio saves resources by reducing portfolio management, allowing for greater long-term investing and, as a result, more peace of mind. A diversified fund is more resilient and not all shares change at the same time, leaving it less vulnerable to price swings. Furthermore, a more stable return and lower uncertainty may help investors maintain composure and/or avoid being irrational, which can lead to a poor investment decision.
How is Dubai Diversifying Its Economy to Attract Investment?
Evolving with the Times
Dubai is a city that is constantly changing. Dubai, and the UAE as a whole, has been undergoing a macroeconomic revolution in recent years, driven by a need to transition away from the single commodity economy for which it was once so well known. The implementation of a 5% VAT in 2018, as well as significant, initiative-driven investments in infrastructure, education, healthcare, and renewable energy, among other sectors, have all contributed to Dubai’s increased diversity. As a result, the UAE has been able to withstand sharp fluctuations in oil and gas prices.
However, the company’s diversification journey is far from complete; oil remains its primary source of revenue. And, in order to reduce this reliance, even more, it is working to re-define itself with a future city by creating a thriving, sustainable, and secure business environment.
Implementation of Strategies and Initiatives
About two-thirds of the world’s population is within an eight-hour flight of Dubai, which seeks to use its strategic position between east and west to become the ‘Capital of the Islamic Economy’ and a key trading conduit into Africa, Asia, and Europe. Through orchestrating cooperation between emirates, free zones, and transportation authorities, Dubai’s Silk Road’ plan aims to catalyze this ambition, upgrading Dubai’s capabilities in trade and logistics.
State-sponsored programs such as the “UAE Vision 2021” and the “National Innovation Strategy” have been launched to carry out this intended diversification. The need to move to a knowledge-based economy underpins these policies, with the ‘Vision 2021’ aiming for excellence in six national focus areas:
- World-class healthcare
- First-rate education system
- Sustainable environment and infrastructure
- Cohesive society and preserved identity
- Safe public and fair judiciary
- Competitive knowledge-based economy
Paving Path to a Better Future
The only way to stay afloat in the coming years is to look into alternative income sources. For several businesses, the key to success is figuring out how to best use their capital, especially fixed assets, to create additional revenue streams. In 2021, the most advantageous step would be in the direction of e-commerce, especially in the logistics sector. Since they have solid diversification policies in motion, business leaders are assured that they can survive the storm.
Dubai has twenty-four free zones, each appealing to different businesses and markets. The Dubai Airport Free Zone(DAFZ) is one of the world’s fastest expanding free zones, not only in Dubai. On the DAFZ, there are nearly 1600 companies engaged in construction, communications, transportation, and aviation activities. By providing state-of-the-art facilities and new services, Dubai International Airport creates a fertile market environment. Dubai International Financial Centre is a free zone devoted to linking the economies of the Americas, Europe, and Asia, with no restrictions on capital conversion or tax repatriation. Dubai is home to a range of banks, insurance firms, and consultants. International administrative and legal principles apply to them.
Final Words
Dubai’s attempts to diversify its economy have made it a global symbol of how an economy can conquer any obstacle. Even as the global economy is facing headwinds, Dubai’s “macroeconomic stability climate, diversification and stabilization policies, development plans, and infrastructure programs continue to boost outstanding economic results,” according to a recent survey.
It’s critical to recognize that expansion may be a destructive factor. It can have an impact on any area of your company, putting a strain on your employees, personnel, and finances. This is why you must prepare meticulously and ask yourself the crucial question: Is my company able to expand? Before entering a whole new industry, you can draft a growth business strategy and obtain professional guidance if you believe you are ready.
